BT Brands, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. 31 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of BT Brands, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of BT Brands, Inc. (the Company) as of December 29, 2024, and December 31, 2023, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the fiscal years then ended (collectively referred to as the “consolidated” financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2024, and December 31, 2023, and the results of its operations and its cash flows for the fiscal years then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters. /s/ Boulay PLLP We have served as the Company’s auditors since 2015. Minneapolis, Minnesota March 31, 2025 PCAOB ID: 542 F-1 Table of Contents PART I FINANCIAL INFORMATION BT BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2024 December 31, 2023 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,951,415 $ 5,300,446 Marketable securities 2,319,555 1,392,060 Receivables 69,459 28,737 Inventory 272,603 201,333 Prepaid expenses and other current assets 127,621 47,246 Assets held for sale 258,751 258,751 Total current assets 4,999,404 7,228,573 PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 3,343,340 3,247,013 OPERATING LEASE RIGHT-OF-USE ASSETS 1,724,052 1,789,285 EQUITY INVESTMENT IN UNCONSOLIDATED SUBSIDIARY 304,439 718,806 INVESTMENT IN EQUITY AND NOTES RECEIVABLE FROM RELATED COMPANY 424,000 304,000 DEFERRED INCOME TAXES - 206,000 GOODWILL 796,220 671,220 INTANGIBLE ASSETS, NET 367,799 395,113 OTHER ASSETS, NET 37,543 49,202 Total assets $ 11,996,797 $ 14,609,212 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 612,059 $ 555,247 Broker margin loan - 115,899 Current maturities of long-term debt 185,009 183,329 Current operating lease obligations 274,511 215,326 Accrued expenses 371,356 480,289 Total current liabilities 1,442,935 1,550,090 LONG-TERM DEBT, LESS CURRENT PORTION 2,091,335 2,269,771 NONCURRENT OPERATING LEASE OBLIGATIONS 1,497,300 1,600,622 Total liabilities 5,031,570 5,420,483 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock, $ 0.001 par value, 2,000,000 shares authorized, no shares outstanding at December 29, 2024 and December 31, 2023 - - Common stock, $ 0.002 par value, 50,000,000 authorized, 6,461,724 issued and 6,154,724 outstanding at December 29, 2024 and 6,246,118 outstanding at December 31, 2023 12,309 12,492 Less cost of 306,394 and 215,000 common shares held in Treasury at December 29, 2024 and December 31, 2023, respectively ( 499,718 ) ( 357,107 ) Additional paid-in capital 11,813,735 11,583,235 Accumulated deficit $ ( 4,361,099 ) ( 2,049,891 ) Total shareholders' equity 6,965,227 9,188,729 Total liabilities and shareholders' equity $ 11,996,797 $ 14,609,212 See Notes to Consolidated Financial Statements F-2 BT BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS 52 Weeks Ended 52 Weeks Ended, December 29, 2024 December 29, 2023 SALES $ 14,823,472 $ 14,076,653 COSTS AND EXPENSES Restaurant operating expenses Food and paper costs 5,605,579 5,597,167 Labor costs 6,128,574 5,458,351 Occupancy costs 1,403,204 1,312,717 Other operating expenses 962,287 841,894 Depreciation and amortization expenses 742,860 598,540 Restaurant asset impairment charge 371,872 - General and administrative expenses 1,691,404 1,650,755 Gain on sale of assets ( 250,000 ) ( 310,182 ) Total costs and expenses 16,655,780 15,149,242 Loss from operations ( 1,832,308 ) ( 1,072,589 ) UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES ( 93,458 ) 80,139 REALIZED GAIN ON MARKETABLE SECURITIES 143,340 23,058 INTEREST AND DIVIDEND INCOME 178,279 300,923 INTEREST EXPENSE ( 99,906 ) ( 97,608 ) OTHER INCOME 13,930 80,790 EQUITY IN NET LOSS OF AFFILIATE ( 415,085 ) ( 347,081 ) LOSS BEFORE TAXES ( 2,105,208 ) ( 1,032,368 ) INCOME TAX BENEFIT (EXPENSE) ( 206,000 ) 145,000 NET LOSS $ ( 2,311,208 ) $ ( 887,368 ) NET LOSS PER COMMON SHARE - Basic and Diluted $ ( 0.37 ) $ ( 0.14 ) WEIGHTED AVERAGE SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS - Basic and Diluted 6,194,842 6,261,631 See Notes to Consolidated Financial Statements F-3 Table of Contents BT BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the 52-week periods- Common Stock Additional Paid-in Accumulated Treasury Shares Amount Capital (Deficit) Stock Total Balances, January 1, 2023 6,396,118 $ 12,792 $ 11,409,235 $ ( 1,162,523 ) $ ( 106,882 ) $ 10,152,622 Stock-based compensation - - 174,000 - - 174,000 Treasury stock purchases ( 150,000 ) ( 300 ) - ( 250,225 ) ( 250,525 ) Net loss - - - ( 887,368 ) - ( 887,368 ) Balances, December 31, 2023 6,246,118 $ 12,492 $ 11,583,235 $ ( 2,049,891 ) $ ( 357,107 ) $ 9,188,729 Stock-based compensation - - 230,500 - - 230,500 Treasury stock purchases 91,394 ( 183 ) - - ( 142,611 ) ( 142,794 ) Net loss - - - ( 2,311,208 ) - ( 2,311,208 ) Balances, December 29, 2024 6,337,512 $ 12,309 $ 11,813,735 $ ( 4,361,099 ) $ ( 499,718 ) $ 6,965,227 See Notes to Consolidated Financial Statements F-4 Table of Contents BT BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS 52 Weeks ended, December 29, 2024 December 31, 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ ( 2,311,208 ) $ ( 887,368 ) Adjustments to reconcile net loss to net cash used in operating activities- Depreciation and amortization 742,860 598,540 Amortization of debt issuance premium included in interest expense 5,400 5,400 Deferred taxes 206,000 ( 145,000 ) Stock-based compensation 230,500 174,000 Unrealized loss (gain) on marketable securities 93,458 ( 80,139 ) Investment gains ( 143,340 ) ( 23,058 ) Loss on equity method investment 415,085 346,380 Charge for impairment of restaurant assets 371,872 Gain on sale of assets ( 250,000 ) ( 310,182 ) Loss on disposal of assets 90,087 - Non-cash operating lease expense 21,096 12,849 Property tax liability settlement - ( 181,339 ) Changes in operating assets and liabilities, net of acquisitions - Receivables ( 40,722 ) 48,211 Inventory ( 6,270 ) ( 42,982 ) Prepaid expenses and other current assets ( 80,375 ) ( 9,849 ) Accounts payable 40,985 106,642 Accrued expenses ( 108,933 ) 129,108 Net cash used in operating activities ( 723,505 ) ( 258,787 ) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of net assets of Schnitzel Haus ( 943,000 ) - Proceeds from sale of assets 250,000 496,000 Purchase of property and equipment ( 494,064 ) ( 488,388 ) Loans to related company ( 120,000 ) - Purchase of marketable securities ( 2,296,923 ) ( 532,403 ) Proceeds from the sale of marketable securities 1,419,310 5,237,835 Net cash provided (used by) investing activities ( 2,184,677 ) 4,713,044 CASH FLOWS FROM FINANCING ACTIVITIES Repayment of broker margin loan ( 115,899 ) ( 675,471 ) Principal payment on long-term debt ( 182,156 ) ( 378,393 ) Purchase of treasury shares ( 142,794 ) ( 250,525 ) Net cash used in financing activities ( 440,849 ) ( 1,304,389 ) CHANGE IN CASH AND CASH EQUIVALENTS ( 3,349,031 ) 3,149,868 CASH AND CASH EQUIVALVENTS, BEGINNING OF PERIOD 5,300,446 2,150,578 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,951,415 $ 5,300,446 SUPPLEMENTAL DISCLOSURES Cash paid for interest $ 93,696 $ 85,923 Purchase of property and equipment included in accounts payable $ 15,109 $ - See Notes to Consolidated Financial Statements F-5 Table of Contents NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization BT Brands, Inc. (“BT Brands,” “we,” “us,” “our” or the “Company”) was incorporated as Hartmax of NY Inc. on January 19, 2016. Effective July 30, 2018, we acquired 100% of the ownership of BTND, LLC (“BTND”) in exchange for common stock through a Share Exchange Agreement (the “Share Exchange”). In 2020, BT Brands, Inc. was reincorporated in the State of Wyoming. Business As of December 29, 2024, the Company owned and operated twelve restaurants and owned a 39.6 %, as of year-end, interest in an operator of six restaurants. During 2024, we owned and operated eight Burger Time restaurants in the North Central region of the United States. In February 2024, we closed a leased location in Sioux Falls, South Dakota. The net book value of the closed location was approximately $ 69,000 . We own Keegan’s Seafood Grille (“Keegan’s”), a dine-in restaurant located in Florida, Pie In The Sky Coffee and Bakery (“PIE”), a casual dining coffee shop bakery located in Woods Hole, Massachusetts, Schnitzel Haus a fine dining German-themed restaurant in Hobe Sound, Florida featuring German and American menu items German and American beer, wine and cocktails, The Village Bier Garten (“VBG”), a German-themed restaurant in Cocoa, Florida operated during 2024 and closed January 3, 2025. Our Burger Time restaurants feature a variety of burgers and other affordable foods, sides, and soft drinks. Keegan’s Seafood Grille has operated in Indian Rocks Beach, Florida, for over thirty-five years, offering a variety of fresh seafood items for lunch and dinner. The menu at Keegan’s includes beer and wine. PIE features an array of freshly baked goods, freshly made sandwiches, and locally roasted coffee. Our revenues are derived from food and beverages at our restaurants, retail goods such as apparel, private-labeled “Keegan’s Hot Sauce,” and other items that account for an insignificant portion of our income. On June 2, 2022, the Company purchased 11,095,085 common shares of Bagger Dave’s Burger Tavern, Inc. (“Bagger Dave’s” or “BDVB”). Initially, our ownership represented 41.2 % ownership of BDVB, and in 2024, it represented 39.6%. We acquired the shares for $ 1,260,000 , or approximately $ 0.114 per share. In 2023 and 2022, representatives of BT Brands were appointed to two of the three positions on Bagger Dave’s board of directors. Bagger Dave’s specializes in locally sourced, never-frozen prime rib recipe burgers, all-natural lean turkey burgers, hand-cut fries, locally crafted beers on draft, milkshakes, salads, black bean turkey chili, and pizza. The first Bagger Dave’s opened in January 2008 in Berkley, Michigan. There are six Bagger Dave’s restaurants, including four in Michigan and single units in Ft. Wayne, Indiana, and Centerville, Ohio. Our investment in Bagger Dave’s is accounted for under the “Equity Method.” Principles of Consolidation The accompanying consolidated financial statements include the accounts of BT Brands, Inc., BTND, LLC, and its wholly owned subsidiaries 10Water Street, LLC, 1519BT, LLC, and BTNDDQ, LLC. Significant intercompany accounts and transactions were eliminated in consolidation. Use of Estimates in Preparation of Financial Statements The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (GAAP), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the period. Our significant estimates include the valuation of certain long-lived assets and valuation of equity method investments. Actual results may differ from the estimates used in preparing the consolidated financial statements. Fiscal Year The Company’s fiscal year is a 52/53-week year, ending on the Sunday closest to December 31. Most years consist of four 13-week accounting periods comprising the 52-week year. Fiscal 2024 was the 52 weeks ending December 29, 2024, and Fiscal 2023 was the 52 weeks ending December 31, 2023; all references to years in this report refer to the fiscal years described above. F-6 Table of Contents Fair Value of Financial Instruments Our accounting for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (FASB) fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are as follows: · Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities for which we have the ability to access the measurement date. · Level 2 inputs are inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the entire term of the asset or liability. · Level 3 Inputs are unobservable inputs for the asset or liability. The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to fair value measurement in its entirety. The carrying values of cash equivalents, receivables, accounts payable and other financial working capital items approximate fair value at year-end due to the short maturity nature of these instruments. Carrying value of debt approximate fair value due to its variable interest rate. Equity Method Investments in companies in which the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method. This method recognizes the Company's share of the investee's net income or loss, and dividends received, as adjustments to the investment carrying amount. The Company's share of the investee's net income or loss is recognized in the income statement, while dividends received reduce the investment carrying amount. Investments Bagger Dave’s- Our investments include our net investment of $ 304,439 in Bagger Dave’s as determined under the “Equity Method” of accounting, net of recording our equity share in Bagger Dave’s losses. NGI related party investment- Our CEO, Gary Copperud, is Chairman of the board of directors of NGI. Our COO, Kenneth Brimmer, is also an NGI board member and serves as its CFO. Our total investment in equity and loans to NGI Corporation (“NGI”) is $ 424,000 , which includes $ 120,000 in demand loans to NGI during 2024; the notes bear interest at 15% with interest payable-in-kind, the balance on NGI notes is convertible into NGI Series B preferred shares and warrants at any time at the option of the holder, and $ 6,600 in accrued interest has not been recognized as the conversion option is evaluated. The Company also has made $ 304,000 in prior equity investments in NGI. A portion of the NGI investment includes equity in the form of 179,000 common shares received in 2020 as consideration for extending the maturity of a note receivable repaid in August 2020. Under the Note modification terms, we acquired 179,000 NGI common shares from its founders. We also received warrants expiring on March 31, 2029, to purchase 358,000 shares of common stock for $1.00 per share. We attributed $75,000 to the value of the equity received. This amount was reflected as interest income in 2020. On February 12, 2022, we invested $229,000 in 138,788 shares of NGI Series A1 8% Cumulative Convertible Preferred Stock, convertible share for share into NGI common shares. This investment is reflected at the cost of $229,000. The preferred investment included a five-year warrant to purchase 34,697 shares at $1.65 . The investment in NGI does not have a readily determinable market value, and it is carried at the historic cost determined by BT Brands, which the Company believes is reasonable relative to recent stock sales by NGI. BDVB files quarterly and annual financial reports with OTCMarkets, Inc. The listing with OTC Markets does not require the information to be audited. Below is a summary of information filed by Bagger Dave’s for the fiscal years ending December 29, 2024, and December 31, 2023. In February 2025, the Bagger Dave’s location in Chesterfield, Michigan, was closed because of poor performance. The sale of all six of Bagger Dave’s locations is currently being negotiated at a value over the carrying value. While the sale of the restaurant assets is being pursued, there is no assurance the sale will ultimately occur. F-7 Table of Contents Unaudited summary financial information for Bagger Dave’s - Balance Sheet Information - December 29, 2024 December 31, 2023 Total current assets $ 1,012,529 $ 1,606,842 Total noncurrent assets 2,154,049 3,158,659 Total assets 3,166,578 4,765,501 Total current liabilities 711,014 640,092 Total noncurrent liabilities 1,408,091 2,030,286 Total liabilities 2,119,105 2,670,378 Stockholders’ equity 1,047,473 2,095,123 Total liabilities and stockholders’ equity $ 3,166,578 $ 4,765,501 Statements of Operations information - December 29, 2024 December 31, 2023 Revenue $ 7,176,536 $ 7,964,854 Depreciation and amortization ( 527,274 ) ( 656,067 ) Other costs and expenses ( 7,696,912 ) ( 8,161,248 ) Net loss $ ( 1,047,650 ) $ ( 852,461 ) Fair Value Measurements The following is a summary of the fair value of Level 1 investments. As required, fair values have been determined by reference to quoted market prices in active markets as of the year-end indicated: December 29, 2024 December 31, 2023 Fair value Carrying Amount Level 1 Fair value Carrying Amount Level 1 Corporate bond fund $ - $ - $ 178,500 $ 178,500 Common stocks 2,129,986 2,129,986 1,213,560 1,213,560 Real estate investment trust 189,569 189,569 - - Total $ 2,319,555 $ 2,319,555 $ 1,392,060 $ 1,392,060 Cash and Cash Equivalents Cash and cash equivalents may include United States Treasury Bills with a maturity at the time of purchase of three months or less. Our bank deposits often exceed the amounts insured by the Federal Deposit Insurance Corporation. In addition, we maintain cash deposits in brokerage accounts, including money funds in excess of the amounts covered by insurance. We do not believe there is a significant risk related to cash. Broker Margin Loan At December 31, 2023, we had a broker margin loan outstanding of $ 115,899 which was repaid during 2024. The broker margin loans carried variable margin interest rate as set by the lending brokerage firm and was 6.8 % at December 31, 2023; there was no amount due to brokers at December 29, 2024. Any broker margin loan is collateralized by marginable securities held in the margin account and is due on demand under Federal Reserve margin account regulations and the margin account agreement. Deferred Transaction Costs Deferred transaction costs for the year ended December 31, 2024, primarily consist of legal fees that were capitalized as incurred and will be offset against the proceeds from future ATM offerings. The deferred transaction costs will be reviewed periodically to assess the probability that future securities will be offered. In the event that no future offering will occur, any deferred transaction costs will be expensed. Total costs incurred, but not accounted for as a reduction in equity, were $ 10,000 as of December 31, 2024. F-8 Table of Contents Revenue Recognition Our revenues consist principally of selling food products for cash or bank-issued credit and debit card transactions at our restaurants. We follow Accounting Standards Update (ASU) 2014-09 (ASC 606). Under ASC 606, revenues are recognized when control of promised goods or services is transferred to a customer in an amount that reflects the expected consideration for those goods or services. Our sales are recognized at the point of purchase, net of discounts and incentives and net of applicable sales taxes. Receivables In these consolidated financial statements, receivables consist of rebates due from a primary vendor. Inventory Inventory consists of food, beverages, supplies, and merchandise for resale and is stated at a lower of cost (first-in, first-out method) or net realizable value. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives or the term of the lease for leasehold improvements if less than its useful life: We review long-lived assets to determine if their carrying value may not be recoverable based on estimated cash flows. Assets are evaluated at the lowest level, for which cash flows can be identified at the restaurant level. Significant estimates are made for each restaurant’s future operating results over its remaining life in determining future cash flows. If such assets are concluded to be impaired, the impairment recognized is measured by the amount by which the carrying value of the assets exceeds the carrying value of the assets. Estimated Useful life In years Equipment 3 - 7 Leasehold Improvements 5 - 10 Building 15 - 25 Impairment and Disposal of Long-Lived Assets Land, building, equipment, operating right-of-use assets, and certain other assets, including definite-lived intangible assets, are reviewed regularly for impairment and whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount of the assets to the future undiscounted net cash flow expected to be generated, and it is determined at the restaurant level. If an asset is determined to be impaired, the recognized impairment is measured by the amount by which the carrying amount of the asset exceeds the fair value. We may sell an existing unit or close an operating unit and seek to liquidate the property. We closed stores in West St. Paul in 2022 and Richmond, Indiana, in 2018. The West St. Paul location was sold in 2023 for a gain of $ 310,182 . The Richmond location is currently offered for sale, and we believe the Richmond property will be sold above its carrying value of approximately $258,000. In 2024, we closed a leased location in Sioux Falls, South Dakota, resulting in a loss on the disposal of equipment of approximately $90,000, which is included in operating expenses. Following the end of our 2024 fiscal year on January 2, 2025, we closed the Village Bier Garten, sold certain equipment for $34,500 and assigned the remaining lease to an unrelated party . As a result, we reviewed VBG’s assets for impairment, resulting in recording an impairment loss of 371,872 in 2024. The Ham Lake, Minnesota, location was closed in January 2025. We are currently assessing alternatives for the property that we believe have value above its net book value of $ 424,000 . Sale of Hot-N-Now Trademark Effective October 9, 2024, we completed the sale of a trademark property. The Hot-N-Now trademark, with no cost basis, was sold for an upfront cash payment of $ 250,000 and potential future payments of up to $150,000 based upon $10,000 per unit for each Hot-N-Now unit opened by the purchaser . A gain on the sale of an asset of $ 250,000 was recognized in 2024. F-9 Table of Contents Leases Three of our restaurant locations are subject to leases . We evaluate leases at commencement to determine their operating or finance lease classification. Under FASB ASC Topic 842 requirements, we recognize operating and finance lease liabilities based on the present value of the minimum future lease payment over the expected lease term and recognize a corresponding right-of-use asset. We recognize lease expense related to operating leases on a straight-line basis. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. For lease agreements that contain both lease and non-lease components, the Company has elected to account for the lease and non-lease components as a single lease component. The Company has elected to not apply the requirements of ASC 842 for short-term leases. Short-term leases are defined as leases that, at the commencement date, have lease terms of twelve months or less. At lease inception, we determine the likelihood of exercising any future lease option periods. Where we are reasonably certain to exercise our renewal option, we include that option period in calculating the present value of future lease payments. See Note 4 for additional information. Goodwill, Other Intangible Assets, and Other Assets Goodwill is not amortized. Goodwill is tested for impairment annually or more frequently if the conditions indicate additional review is necessary. The Company assesses qualitative factors to determine if it is more likely than not that the fair value is less than its carrying amount and if it is necessary to perform the qualitative goodwill impairment test. The Company has one reporting unit. If the Company performs the quantitative test, it compares the carrying value of the reporting unit to an estimate of the reporting unit’s fair value to identify potential impairment. The fair value of the reporting unit is estimated using a discounted cash flow model. Where available, and as appropriate, comparable market multiples are also used to corroborate the results of the discounted cash flow models. In determining the estimated future cash flow, the Company considers and applies certain estimates and judgments, including current and market projected future levels of income based on management’s plans, business trends, prospects and economic conditions and market-participant considerations. If the estimated fair value of the reporting to unit is less than the carrying value, a goodwill impairment loss is recorded for the difference, up to the amount of the total goodwill. During the year ended December 29, 2024, no impairment losses were identified. The cost of other intangible assets is amortized over the expected useful life. Advertising and Marketing Costs We expense advertising and marketing costs as incurred. Advertising expenses for fiscal years 2024 and 2023 totaled $ 59,438 and $ 81,594 , respectively. Income Taxes We provide for income taxes under ASC 740, Accounting for Income Taxes, using an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. ASC 740 requires the net of deferred tax assets and deferred tax liability to be presented as a single amount on the balance sheet. It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense (benefit). Per Common Share Amounts Net income per common share is computed as required by section 260-10-45 of the FASB Accounting Standards Codification. Basic net income or (loss) per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. Common stock equivalents are excluded from diluted net income (loss) computation per share because their effect is anti-dilutive. As a result, no common stock equivalents were dilutive as of the years ended in 2024 and 2023. There are currently 2,746,838 five-year warrants exercisable at $ 5.50 per share outstanding. These warrants were issued as a part of our November 12, 2021, initial public offering. At the end of fiscal 2024 and 2023, all outstanding warrants were exercisable at prices above the underlying stock’s market price and, therefore, were not dilutive. Restaurant Pre-opening expenses Restaurant pre-opening and other development expenses are non-capital expenditures and are expensed as incurred as part of other operating expenses. Restaurant pre-opening expenses may include the costs of hiring and training the initial hourly workforce for each new restaurant, travel, the cost of food and supplies used in training, grand opening promotional expenses, the cost of the initial stocking of operating supplies, and other direct costs related to the opening of a restaurant, including rent during the construction and in-restaurant training period. Stock-Based Compensation Stock-based compensation relates to the issuance of stock options and restricted stock. In our consolidated financial statements, we recognize stock-based compensation as an expense. Equity-classified awards are measured at the grant date fair value of the award. We estimated the grant date fair value using the Black-Scholes option-pricing model. We recognize a compensation expense, net of estimated forfeitures, on a straight-line basis over the employee service periods for awards granted. F-10 Table of Contents Reclassifications In 2024, the Company made certain reclassifications to its consolidated balance sheet and statement of operations presentation to enhance financial reporting consistency. These reclassifications involved adjusting certain 2023 comparative amounts to conform to the current year’s presentation. The reclassifications did not impact previously reported total assets, total liabilities, stockholders’ equity, or net income for the year ending December 31, 2023. These adjustments were made solely for presentation purposes and did not affect the Company’s overall financial position, results of operations, or cash flows. Segment Reporting - Recently Adopted Accounting Guidance: We follow the guidance of FASB Accounting Standards for reporting and disclosure on operating segments, which require segment disclosures about products and services, geographic areas, and significant customers. We have determined that we did not have separately reportable operating segments. In November 2023, the FASB issued ASU 2023-07: Improvements to Reportable Segment Disclosures. This ASU, which amends Topic 280: Segment Reporting , improves disclosure requirements for reportable segments and enhances disclosures for companies with single reportable segments. The Company has concluded it has a single reportable segment based on the nature of its operations and the regulatory environment under which it operates. The business’s nature and the segment’s accounting policies are the same as described in Note 1 - Business . The Company’s Chief Operating Decision Maker (“CODM”) is its executive team made up of its CEO and Chief Financial Officer. The CODM assesses the reportable segment’s performance and allocates resources for the reportable segment based on the net income and total assets, which are the same amounts in all material respects as those reported on the consolidated statements of operations and consolidated balance sheets. The Company adopted the standard on January 1, 2024. The adoption did not have an impact on the Company’s consolidated financial statements. NOTE 2 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following at the end of the respective fiscal year: December 29, 2024 December 31, 2023 Land $ 435,239 $ 435,239 Equipment 4,149,525 3,994,685 Buildings and leasehold improvements 2,915,784 2,463,626 Total property and equipment 7,500,548 6,893,550 Accumulated depreciation ( 3,575,663 ) ( 3,387,786 ) Net 3,924,885 3,505,764 Less - property held for sale ( 258,751 ) ( 258,751 ) Less - impairment charge ( 322,794 ) — Net property and equipment $ 3,343,340 $ 3,247,013 Depreciation expenses for 2024 and 2023 were $ 652,967 and $ 539,675 , respectively. F-11 Table of Contents NOTE 3 – INTANGIBLE ASSETS At year-end 2024 and 2023, based on the value of acquired assets, intangible assets comprise the following: December 29, 2024- Estimated Useful Life (Years) Original Cost Accumulate Amortization Net Carrying Value Covenants not to compete 3 $ 198,000 $ ( 103,135 ) $ 94,865 Tradenames 15 393,000 ( 70,988 ) 322,012 Impairment charge ( 49,078 ) $ 591,000 $ ( 174,123 ) $ 367,799 December 31, 2023- Estimated Useful Life (Years) Original Cost Accumulated Amortization Net Carrying Value Covenants not to compete 3 $ 98,000 $ ( 51,028 ) $ 46,972 Tradenames 15 393,000 ( 44,859 ) 348,141 $ 491,000 $ ( 95,887 ) $ 395,113 Following the end of 2024, on January 2, 2025, the Company closed its Village Bier Garten location. In connection with the closure, the Company recognized the impairment of Village Bier Garten assets and has recorded an allowance to fully reserve for the remaining carrying value of intangible assets associated with the location. Tradename assets are amortized over 15 years. Total amortization expense for 2024 was approximately $ 90,000 . The total amortization of intangible assets, including the covenants not to compete will approximate $ 62,600 in 2025, $ 56,300 in 2026, $ 36,800 in 2027 and $ 26,200 per year through 2036 and approximately $ 5,600 in 2037. Total amortization expense of intangible assets in 2024 includes $ 11,660 of expense to write off the intangible asset related to the Company’s former franchise asset upon termination of the franchise agreement. This amount was included in other assets in the 2023 consolidated balance sheet. NOTE 4 – LEASES With Keegan’s acquisition, we entered into a lease for approximately 2,800 square feet of restaurant space. The 131 -month Keegan’s lease provides for an initial rent of $ 5,000 per month with an annual escalation equal to the greater of 3 % or the Consumer Price Index. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The lease is being accounted for as an operating lease. At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $ 624,000 . The present value discounted at 3.75 % of the remaining lease obligation of $ 505,626 at December 29, 2024 and $ 547,687 at the end of 2023 are reflected as liabilities in the accompanying financial statements. When we acquired the PIE assets, we entered into a lease for approximately 3,500 square feet of restaurant and bakery production space. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The terms of the 60 -month lease provide for an initial rent of $ 10,000 per month with an annual escalation of 3 % after 24 months. The PIE lease includes three five-year renewal option periods at our option. The PIE lease is accounted for as an operating lease. At the inception of the lease, we concluded it was reasonably certain the initial five-year option would be exercised and recorded as an operating lease obligation and a right-of-use asset of approximately $ 1,055,000 . The present value discounted at 4.5 % of the remaining lease obligation of $ 847,949 on December 29, 2024, and $ 923,885 at the end of 2023 are reflected as liabilities in the accompanying financial statements. With the acquisition of VBG assets, we assumed a five-year lease from the seller for approximately 3,000 square feet of restaurant space and access to an additional 3,000 square feet of shared entertainment seating area. The terms of the triple-net 60-month lease provide for an initial rent of $ 8,200 per month with an annual escalation of 3 %. The VBG lease includes three five-year renewal periods at our option. Variable lease costs consist primarily of property taxes, insurance, certain utility expenses, and sales tax. The VBG lease is accounted for as an operating lease. At the inception of the lease, we recorded an operating lease obligation and a right-of-use asset of $ 470,000 . The present value discounted at 4.5 % of the remaining lease obligation of $ 256,462 as of December 29, 2024, and $ 352,100 at December 31, 2023 are reflected as liabilities in the accompanying consolidated financial statements. F-12 Table of Contents In May 2024, with the acquisition of Schnitzel Haus, we assumed the remaining 44 months on the restaurant’s lease obligation for approximately $ 5,400 per month for approximately 4,200 square feet. The Schnitzel Haus lease is accounted for as an operating lease. At its inception, we recorded an operating lease obligation and a right-of-use asset of $ 182,878 . The present value, discounted at 6.5 % of the remaining lease obligation of $ 161,774 , is reflected as a liability in the accompanying consolidated balance sheet at December 29, 2024. The following is a schedule of the approximate minimum future lease payments on the operating leases as of December 29, 2024, including amounts assuming we exercise the option to extend leases where we believe that exercise of the option is likely. Total 2025 $ 344,410 2026 368,288 2027 339,165 2028 225,193 2029 214,863 Thereafter 582,279 Total future minimum lease payments 2,074,198 Less - interest ( 302,387 ) Present value of lease obligations $ 1,771,811 The weighted average remaining lease term is approximately 6.6 years, and the weighted average discount rate is approximately 4.79 %. We cannot determine the interest rate implicit in our leases. Therefore, the discount rate represents our estimated incremental interest rate to borrow an amount approximating the aggregate lease payments collateralized by the property over a similar term at the commencement of the lease. The total operating lease expense for 2024 and 2023 were $ 408,696 and $ 298,567 , respectively. Cash paid for leases was approximately $ 330,000 in 2024 and $ 282,000 in 2023. Variable expenses for leased properties were $ 57,525 in 2024 and $ 16,500 in 2023. Through January 2025, we paid $ 550 per month under an annual rental agreement for corporate and administrative office spaces in West Fargo, North Dakota, which was terminated in January 2025, and we paid $ 1,350 per month in Minnetonka, Minnesota, for a combined monthly rent of approximately $ 1,900 in 2024. NOTE 5 – INCOME TAXES Income taxes are accounted for in accordance with ASC 740, Income Taxes , which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements or tax returns. As of December 29, 2024, the Company has recorded total deferred tax assets of $ 616,000 , primarily attributable to net operating loss carryforwards (NOLs) offset by temporary differences related to property and equipment. Management assesses the realizability of deferred tax assets annually and considers all available positive and negative evidence, including historical operating performance, taxable income projections, and reversal of deferred tax liabilities. Based on this evaluation, the Company has determined that sufficient uncertainty exists regarding the future realization of these deferred tax assets. Accordingly, a valuation allowance of $ 616,000 has been recorded as of December 29, 2024, reducing the net deferred tax asset balance to zero. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company will continue to assess the need for a valuation allowance in future periods. Should circumstances change and sufficient positive evidence emerge to support the realization of deferred tax assets, all or a portion of the valuation allowance may be reversed. Principally, due to accelerated tax depreciation in prior years, which allowed for the depreciation of assets acquired in a business acquisition, and the operating results in the current year, the losses for tax purposes resulted in a total estimated net operating federal loss carryforward of approximately $ 3.3 million at year-end 2024 and $ 1.9 million on December 31, 2023. These carryforwards are available for future utilization subject to taxable income limitations and under Internal Revenue Code Section 382 due to ownership changes. The Company has various state net operating loss carryforwards of $ 3.1 million, a portion of which will expire after 15 years beginning in 2037 and a portion of which has indefinite life subject to limitation consistent with federal tax rules. F-13 Table of Contents The deferred tax assets are recognized for temporary deductible differences, operating loss, and tax credit carryforwards, and deferred tax liabilities are recognized for temporary taxable differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The tax effect of the temporary differences and carryforwards are as follows for the respective fiscal years: 2024 2023 Deferred tax assets: Net operating loss carryforward $ 813,000 $ 421,000 Stock-based compensation 127,000 78,000 Future tax benefit of impairment allowances 144,000 49,000 Accrued compensation - 22,000 Unrealized gain on short-term investments - 2,000 Total deferred tax assets 1,084,000 572,000 Less: valuation allowance ( 616,000 ) - Total deferred tax assets, net 468,000 572,000 Deferred tax liabilities: Property and equipment tax depreciation difference ( 430,000 ) ( 349,000 ) Unrealized loss (gain) on short-term investments ( 21,000 ) - Goodwill ( 17,000 ) ( 17,000 ) Total deferred tax liabilities 468,000 366,000 Net deferred tax asset $ - $ 206,000 The following table summarizes the components of the provision for income taxes: 2024 2023 Current income tax expense (benefit) $ - $ - Deferred income taxes (benefit) ( 410,000 ) ( 145,000 ) Change in valuation allowance 616,000 - Total income tax expense (benefit) $ 206,000 $ ( 145,000 ) Total income tax expense for the years ended December 29, 2024, and December 31, 2023, differed from the amounts computed by applying the U.S. Federal statutory tax rate of 21 % to pre-tax income as follows: 2024 2023 Total (benefit) computed by applying the statutory federal rate $ ( 442,000 ) $ ( 216,000 ) State income tax (benefit), net of federal tax benefit ( 63,000 ) ( 36,000 ) Equity in loss of unconsolidated subsidiary 87,000 85,000 Other 8,000 22,000 Change in valuation allowance 616,000 - Income tax expense (benefit) $ 206,000 $ ( 145,000 ) Accounting Standards require that deferred tax assets and liabilities, along with any related valuation allowance, be classified as a noncurrent item on the balance sheet. The Company had no accrued interest or penalties relating to income tax obligations and currently has no federal or state examinations in progress, nor has it had any federal or state tax examinations since its inception. The last three years are subject to federal and state tax examinations. With few exceptions, the Company is no longer subject to U.S. Federal and state income tax examinations by tax authorities for years before 2021. F-14 Table of Contents NOTE 6 – ACCRUED EXPENSES Accrued expenses consisted of the following at the end of the respective reporting periods: December 29, 2024 December 31, 2023 Accrued real estate taxes $ 46,401 $ 49,357 Accrued bonus compensation and consulting fees - 119,139 Accrued payroll 177,275 149,587 Accrued payroll taxes 6,851 11,343 Accrued sales taxes payable 57,706 81,683 Accrued vacation pay 17,663 17,663 Accrued gift card liability 38,425 26,844 Other accrued expenses 27,035 24,673 $ 371,356 $ 480,289 NOTE 7 – SHAREHOLDERS’ EQUITY On November 12, 2021, the Company completed a public offering of Units consisting of one share of common stock and one five-year stock purchase warrant to purchase one common share at $ 5.50 . The Company has the right to redeem the warrants under certain conditions. We issued 2,400,000 common shares in the offering and 2,760,000 stock purchase warrants, which included 360,000 warrants to purchase an aggregate of 360,000 shares of common stock purchase pursuant to a partial exercise of the over-allotment option granted to underwriters for $.01 per warrant, totaling $ 3,600 . The estimated fair value of the warrants at the date of issuance, net of the exercise proceeds, was $ 360,000 , which is reflected as an additional cost of the offering. After deducting all fees and expenses, the net proceeds from the offering were $ 10,696,575 . In 2018, we issued 3,708,000 common shares as part of the Share Exchange. Upon closing a related private offering, 205,002 additional common shares and 102,503 common stock warrants to purchase shares at $ 4.00 through July 31, 2024, were issued to investors for a net amount of approximately $ 492,266 . During 2022, 13,612 public warrants were exercised for $ 74,866 . The remaining warrants were outstanding as of the end of 2024. In addition, upon closing the private offering, the placement agent was issued an aggregate of 16,401 five-year stock purchase warrants to purchase shares at $ 3.30 per share, which are also outstanding at 2024. On June 6, 2024, we authorized a stock repurchase program, under which we may repurchase up to 625,000 shares, or approximately 10.0%, of our currently issued and outstanding common stock (the “2024 Share Repurchase Program”). We have not established any maximum aggregate price to be paid for shares that we repurchase. As of December 29, 2024, we repurchased an aggregate of 306,394 including 91,394 shares under the 2024 Share Repurchase Program . We may purchase up to an additional 533,606 shares under the 2024 Share Repurchase Program. We are purchasing the shares with available cash and may repurchase shares of our common stock from time to time, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. Our repurchases may be executed using open market purchases, unsolicited or solicited privately negotiated transactions or other transactions. The 2024 Share Repurchase Program does not obligate us to repurchase any specific number of shares and may be suspended, modified or terminated at any time without prior notice. The 2024 Share Repurchase Program does not contain a time limitation during which repurchases are permitted to occur. Potential Sale and Issuance of Stock On December 13, 2024, BT Brands, Inc. (the “Company”) entered into an Equity Distribution Agreement (the “Distribution Agreement ”) with Maxim Group LLC (“Maxim”) to sell shares of the Company's common stock, par value $ 0.002 per share (the “Common Stock”), subject to the maximum aggregate sales proceeds of up to $ 3,005,000 pursuant to the applicable prospectus supplement, from time to time, through an “at the market offering” program under which Maxim will act as sales agent. Under the Distribution Agreement, the Company will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, any limitation on the number of shares that may be sold in any one day and any minimum price below which sales may not be made. Pursuant to General Instruction I.B.6 of Form S-3, the Company may not sell the shelf securities in a public primary offering with a value exceeding more than one-third of the aggregate market value of its voting and non-voting ordinary shares held by non-affiliates in any 12-month period as long as the aggregate market value of the Company's outstanding ordinary shares held by non-affiliates is less than $75 million. The $3,005,000 of shares of Common Stock that may be offered, issued and sold under the offering prospectus is included in the $25,000,000 of securities that may be offered , issued and sold by the Company under the base prospectus. Subject to the terms and conditions of the Distribution Agreement, Maxim may sell the shares by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. Maxim agreed to use commercially reasonable efforts in conducting such sales activities consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of The Nasdaq Stock Market LLC. The Distribution Agreement may be terminated by the Company or Maxim upon notice to the other party in accordance with the terms of the Distribution Agreement. The offering of the shares of Common Stock pursuant to the Distribution Agreement will terminate upon the termination of the Distribution Agreement in accordance with its terms. The shares of Common Stock will be issued pursuant to the Company's shelf registration statement on Form S-3 (File No. 333-283830), filed with the Securities and Exchange Commission (the “SEC”) on December 13, 2024 (the “Registration Statement”). The Registration Statement was declared effective by the SEC on December 20, 2024. The Company will file a final prospectus supplement with the SEC following the effectiveness of the Registration Statement relating to the offer and sale of the shares of Common Stock pursuant to the Distribution Agreement. The Distribution Agreement contains representations, warranties and covenants that are customary for transactions of this type. Under the terms of the Distribution Agreement, the Company will pay Maxim a commission in an amount equal to 3.0% of the aggregate gross proceeds from each sale of shares of Common Stock made under the Distribution Agreement and reimburse Maxim's expenses, including certain legal fees. The Company has no obligation to sell any shares of Common Stock under the Distribution Agreement and may at any time suspend solicitation and offers under the Distribution Agreement. The Company has also provided Maxim with customary indemnification and contribution rights. Maxim is not under any obligation to purchase any of the shares of Common Stock on a principal basis pursuant to the Distribution Agreement. Maxim's obligations to sell the shares of Common Stock under the Distribution Agreement are subject to the satisfaction of certain conditions, including customary closing conditions. F-15 Table of Contents NOTE 8 – STOCK-BASED COMPENSATION In 2019, we adopted the BT Brands, Inc. 2019 Incentive Plan (the “Plan”) 2019 Plan, under which the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units, and other stock and cash awards to eligible participants. In December 2022, the stockholders authorized the increase of shares available for grant under the 2019 Plan from 250,000 to 1,000,000 shares. As of January 1, 2024, there were 660,750 shares available for a grant under the 2019 Plan. In 2024, we issued 15,000 ten-year options to the then-existing outside members of our Board of Directors to purchase shares at $1.61 per share; we also granted 5,000 fully-vested options to purchase shares at $1.70 per share to a new member of the Board. In 2022, we granted 216,000 options, including 175,000 options to company officers and 41,000 options to employees and a consultant to purchase shares at $ 2.58 per share. In 2023, we issued a consultant warrant to purchase 100,000 shares at $2.50 per share for seven years, with the warrants vesting monthly for over five years as long as the consultant continues in this capacity. Assuming the consulting agreement continues to full term, we project that we will recognize approximately $112,000 in stock-based compensation at $32,000 annually through 2027 and $16,000 in 2028 . As outlined in each agreement, stock options granted to employees and directors vest over four years in annual installments. Options expire ten years from the date of the grant. Compensation expense equal to the fair value of the options at the grant date is recognized in general and administrative expenses over the applicable service period. Compensation expense for 2024 was approximately $ 72,500 and will be approximately $ 59,000 in 2025 and $ 9,000 in 2026. Based on current estimates, we project that we will recognize approximately $183,000 in stock-based compensation expense related to options and consultant warrants over the next four years, including approximately $91,000 in 2025, $41,000 in 2026, $35,000 in 2028, and $16,000 in 2029 . On February 27, 2023, the board of directors Compensation Committee approved an “Incentive Shares” proposal wherein, so long as the Company’s publicly traded warrants are outstanding, senior management will be granted 250,000 shares of common stock as an award upon our share price reaching $ 8.50 per share for twenty consecutive trading days. The total estimated grant date fair value of the award was determined using a lattice model with assumptions similar to the stock option calculation. The total of this award was determined to be $265,000. For 2024, stock-based compensation included approximately $ 126,000 in expenses for the award. We project the remainder of approximately $ 36,000 of stock-based compensation will be recognized in 2025 We utilize the Black-Scholes option pricing model at the date of grant when determining the compensation cost associated with stock options issued using the following significant assumptions: · Stock price – Published trading market values of our common stock as of the grant date; · Exercise price – The stated exercise price of the stock option; · Expected life – The simplified method; · Expected dividend – The rate of dividends expected to be paid over the term of the stock option; · Volatility – Estimated volatility; · Risk-free interest rate – The daily US Treasury yield corresponding to the expected life of the award. Information regarding our stock options, including consultant warrants, is summarized below: Number of Options Weighted Average Exercise Price W eighted Average Remaining Term (In Years) Aggregate Intrinsic Value Options outstanding at January 1, 2023 220,250 $ 2.74 9.0 $ - Granted 100,000 2.50 6.2 - Exercised - - - - Canceled, forfeited, or expired ( 1,000 ) 2.58 - - Options outstanding at December 31, 2023 319,250 $ 2.62 7.6 $ - Options exercisable at December 31, 2023 106,702 2.85 8.3 $ - Options outstanding at December 31, 2023 319,250 $ 2.62 7.6 $ - Granted 20,000 1.64 9.3 - Exercised - - - - Canceled, forfeited, or expired - - - - Options outstanding at December 29, 2024 339,250 $ 2.53 7.4 $ - Options exercisable at December 29, 2024 169,554 $ 2.65 6.8 $ - The Black-Scholes option-pricing model was used to estimate the fair value of the stock options at the date of grant with the following weighted-average assumptions for grants during the year ended December 29, 2024. 2024 2023 The fair value of options and warrants granted during the period $ 1.08 to $ 1.19 $ 1.60 Expected life (in years) 6.0 6.0 Expected dividend - - Expected stock volatility 63 % 63 % Risk-free interest rate 3.75 % 3.75 % F-16 Table of Contents NOTE 9 – LONG-TERM DEBT We had the following long-term debt obligations at: December 29, 2024 December 31, 2023 Three notes payable to a bank dated June 28, 2021 due in monthly installments totaling $22,213, including principal and interest at a fixed rate of 3.45% through June 28, 2031. Beginning in July 2031, the interest rate will equal the greater of the “prime rate” plus .75%, or 3.45%. These notes mature on June 28, 2036. The notes are secured by mortgages covering eight BTND operating locations. The notes are guaranteed by BT Brands, Inc., and a shareholder of the Company. $ 2,307,143 $ 2,489,299 Less - unamortized debt issuance costs ( 30,799 ) ( 36,199 ) Current maturities ( 185,009 ) ( 183,329 ) Long-term debt, less current portion $ 2,091,335 $ 2,269,771 Scheduled maturities of long-term debt, excluding amortization of debt issuance costs, are as follows at December 29, 2024: Fiscal year ending-- 12/28/25 $ 185,009 1/3/27 191,531 12/31/27 198,207 12/30/28 205,270 12/29/29 212,507 Thereafter 1,314,620 $ 2,307,143 NOTE 10 – ACQUISITION On May 13, 2024, our 1519BT, LLC subsidiary completed the purchase of certain assets from LC Food Concepts. The acquired assets comprised a business operating as a high-end German-themed restaurant with approximately 175 seats located in Hobe Sound, Florida, doing business as “Schnitzel Haus. The aggregate purchase price was $ 943,000 , including $ 850,000 paid at closing as payment for certain assets, separate payments of $ 65,000 for inventory on hand at closing, and $ 28,000 for the purchase of a utility vehicle and other items used in the business. With the acquisition, we assumed the seller’s remaining lease obligation of $ 5,400 monthly for 44 months. Aside from the lease obligation, no liabilities of the seller were assumed in the purchase of assets. A summary of the assets acquired is approximately as follows: Property, including leasehold improvements and equipment $ 625,000 Intangible covenant not to compete 100,000 Inventory 65,000 Vehicle and other 28,000 Operating lease right-of-use asset 182,878 Total identifiable assets acquired 1,000,878 Operating lease liability ( 182,878 ) Net identifiable assets acquired 818,000 Goodwill 125,000 Purchase price $ 943,000 NOTE 11 – RELATED PARTY TRANSACTIONS Next Gen Ice Officers of BT Brands, Inc. also serve as officers and directors of NGI Corporation. Our total investment in equity and loans to NGI Corporation (“NGI”) is $ 424,000 , which includes $ 120,000 in demand loans to NGI during 2024, the notes bear interest at 15 % with interest payable-in-kind, and the balance on NGI notes is convertible into NGI Series B preferred shares and warrants at any time at the option of the holder, $ 6,600 in accrued interest has not been recognized as the conversion option is evaluated. The Company also has made $ 304,000 in prior equity investments in NGI. A portion of the NGI investment includes equity in the form of 179,000 common shares received in 2020 as consideration for extending the maturity of a note receivable repaid in August 2020. Under the Note modification terms, we acquired 179,000 NGI common shares from its founders. We also received warrants expiring on March 31, 2029 , to purchase 358,000 shares of common stock for $ 1.00 per share. We attributed $ 75,000 to the value of the equity received. This amount was reflected as interest income in 2020. The fair value of this investment remains consistent with its 2020 valuation. On February 12, 2022, we invested $ 229,000 in 138,788 shares of NGI Series A1 8 % Cumulative Convertible Preferred Stock, convertible share for share into NGI common shares. This investment is reflected at the cost of $229,000. The preferred investment included a five-year warrant to purchase 34,697 shares at $ 1.65 . Our CEO, Gary Copperud, is Chairman of the board of directors of NGI. Our COO, Kenneth Brimmer, is also an NGI board member and serves as its CFO. The investment in NGI does not have a readily determinable market value, and it is carried at the historic cost determined by BT Brands, which the Company believes is reasonable relative to recent stock sales by NGI. F-17 Table of Contents Bagger Dave’s Burger Tavern Officers of BT Brands, Inc. also serve as officers and directors of Bagger Dave’s Burger Tavern, Inc. BT Brands owns approximately 39.6% of the outstanding shares of Bagger Dave’s. The investment is accounted for on the equity method. BT Brands Officer received no compensation from Bagger Dave’s in 2024 and there were no intercompany related party transactions. NOTE 12 – MAJOR VENDORS For the year ended December 29, 2024, approximately 30 % of our food and paper cost of goods sold is represented by product purchases from one vendor. On December 29, 2024, the amount due to the major vendor totaled $ 35,686 . In fiscal 2023, approximately 30 % of our purchases were from the same vendor. In July 2024, we commenced purchasing the majority of BTND food items from a different primary vendor, which also accounted for approximately 21% of 2024 food purchases. The amount due to this new vendor at December 31, 2024 was $ 257,268 . On December 31, 2023, the amount due to the former primary vendor was $ 272,657 . NOTE 13 – CONTINGENCIES In the course of its business, the Company may be a party to claims and legal or regulatory actions arising from its business. We are not aware of any significant asserted or potential claims which could impact its financial position. F-18 Table of Contents Item 9. Changes in and Disagreements with on Accounting and Financial Disclosure. None.